M&T Bank Corp. of Buffalo is giving up automated teller machine surcharge revenue from machines at some convenience stores in exchange for more name recognition and, maybe, more volume.
Two Pennsylvania convenience chains - Sheetz Inc. of Altoona, which has 320 stores, and Rutter's Farm Stores of York, which has 50 - have announced surcharge-free agreements with the $55.1 billion-asset M&T in the past three days.
Michael S. Piemonte, M&T's senior vice president for electronic banking, said the deals will keep the M&T brand "in front of our customers and potential customers."
M&T will still get interchange revenue from noncustomers' debit card issuers, which it will split with the store operators. "It's a much smaller amount, that you hope to make up with a higher volume of transactions," Mr. Piemonte said.
M&T has driven ATMs at Sheetz stores for about a decade but has imposed a surcharge on non-M&T customers who use them. Sheetz said Monday that the two had renewed the relationship but that the surcharge will be eliminated Wednesday. Sheetz has stores in Pennsylvania, Maryland, North Carolina, Ohio, Virginia, and West Virginia.
Louie Sheetz, the chain's executive vice president of marketing, said its goal is more traffic at its stores.
A couple of years ago, when M&T raised the surcharge by 50 cents, to $1.50, ATM use dropped noticeably, Mr. Sheetz said. "When it came time to renew that agreement, we did so with the idea of developing a surcharge-free program," he said.
Shoppers "responded pretty well" in tests of the strategy in a few stores, Mr. Sheetz said. "We're pretty confident we can get out there and attract the new customer."
Before renewing with M&T, Sheetz also talked with PNC Financial Services Group Inc. of Pittsburgh, which drives surcharge-free ATMs for a pair of Sheetz rivals, Quick-Chek of Whitehouse Station, N.J., and Wawa Inc. of Wawa, Pa.
Previously, M&T and the chain split the surcharge fees. Mr. Sheetz would not give details of the new contract except to say that "the higher the usage, the better for both parties."
Rutter's announced Saturday that M&T would begin running a network of ATMs at its stores in early April. It will take over from Community Banks Inc. of Harrisburg, Pa., which has run the machines for more than eight years.
Scott Hartman, the president of Rutter's Farm Stores, said Community charges noncustomers $2 to use the ATMs, but M&T will eliminate the fee. Focus group participants complained about the expense and "we listened to them," he said. "It's purely a customer service decision."
Tony Hayes, the managing director of the financial services practice at the Dove Consulting Inc. division of Hitachi Consulting, called the arrangement "a distribution play rather than an ATM revenue play" for M&T.
A few competitors - such as ATM National Inc.'s Allpoint Network and the credit-union backed Co-op Network - operate surcharge-free debit systems, but their arrangements, like those of Quick-Chek and Wawa, "are largely the exceptions to the rule," Mr. Hayes said.
More typical are deals like the one JPMorgan Chase & Co. struck last June to put its name on teller machines in stores of Duane Reade Inc., New York City's largest drugstore chain. JPMorgan Chase customers get access to more ATMs, but other banks' customers continue to pay a fee.
"If the convenience store allows the bank to surcharge, then in return the convenience store gets a cut of the ATM fee," Mr. Hayes said. "Most are willing to have that surcharge in their stores."
